Cisco VCE Investment Nears $500 Million

It sounds like Cisco Systems, EMC, VMware and Intel have pumped a combined $1.3 billion into VCE -- which provides virtual compute engine solutions for data centers and IaaS clouds. So what's the payoff? Here's an update.

The VAR Guy

May 25, 2013

2 Min Read
VCE seems to be gaining momentum under CEO Praveen Akkuraju
VCE seems to be gaining momentum under CEO Praveen Akkuraju.

Cisco Systems (CSCO) has invested $464 million into VCE since the joint initiative with EMC, VMware (VMW) and Intel (INTC) launched in 2010, according to a recent SEC filing. Since Cisco has a 35 percent stake in VCE, it's safe to estimate that total investments in VCE from all financial backers now top $1.3 billion. Critics keep wondering if VCE's investors can remain aligned amid potential competitive conflicts. But here's the thing: It sounds like VCE is starting to hit its stride.

VCE develops VBlock systems — converged infrastructure that combines hardware and software from Cisco, VMware and EMC for data centers and IaaS clouds.

The challenges:

  • Cisco also works closely with NetApp.

  • EMC and VMware have close relationships with other networking companies.

  • Plus, VCE's investors could wind up competing with each other if software-defined networking (SDN), software-defined-storage (SDS) and software-defined data centers (SDDC) gain momentum.

But instead of going to pieces, VCE has presented a far more unified front in recent months. The turning point seemed to be February 2013, when VCE hit a $1 billion annual run rate; introduced new mid-market solutions; and also unveiled deeper support for SAP's HANA.

At the time, VCE claimed, more than 1,000 Vblock systems had been sold, and 200 channel partners were backing VCE.

So where has VCE gone from there? Multiple sources tell The VAR Guy that Q2 2013 is performing well for VCE. And the company's financial backers plan to pump more money into the company.

According to a recent Cisco SEC filing: "Over the next 12 months, as VCE scales its operations, we expect that we will make additional investments in VCE and may incur additional losses proportionate with our share ownership."

Partnerships like this ain't easy. But Cisco seems committed for the long haul.

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